YOUR MONEY-Should the tooth fairy just vanish forever?

By Chris Taylor

4 Min Read

NEW YORK, Oct 6 (Reuters) - When Claer Barrett, a London-based editor, filed her newspaper column a few weeks ago, it didn't take long for her to realize she had hit a major nerve with its subject matter.

A dental nerve.

The personal finance editor for the Financial Times had proposed the unthinkable in a recent column: Killing off the tooth fairy.

Her logic? In making our kids' first interaction with money a fanciful one, where cash suddenly appears under their pillows from a "magical source," we are doing them a disservice.

Predictably, Barrett's email inbox blew up.

"I had to call for the death of the tooth fairy to make my wider point about personal finance education," Barrett says.

"Many people were angry with me for denying children the fantasy of believing in the tooth fairy, but I argued that they needed to know about financial reality. The tooth fairy is the just tip of the iceberg."

After all, if you introduce young minds to that kind of magical thinking, it can persist for years - in terms of not realizing that money has to be earned, not appreciating the true value of a dollar, and not realizing that their latest must-have iPad or smartphone comes with a huge price tag.

VALUABLE MILK TEETH

Indeed, the tooth fairy has become a rather big business.

According to the Original tooth fairy Poll by Delta Dental, the average reward for a lost tooth in the U.S. in 2014 was a whopping $4.36 from $3.50 a year ago, up by about 25 percent.

On the flip side, some financial experts say it may be an overreaction to make the tooth fairy vanish for good. After all, to a young child, having teeth fall out of your mouth could be a frightening thing, and the promise of a reward might ease the pain.

"I have no issue with the tooth fairy," says Melissa Brennan, a financial planner in Dallas who gives her children a relatively modest dollar for each fallen tooth.

"Children should be given a variety of experiences with money: Sometimes we receive money because we earn it, but sometimes it is a gift."

Overindulgence could be an issue in some families, but Brennan suspects that in those cases, the issue may be deeper than the tooth fairy.

Indeed, 3.6 percent of parents - ahem, I mean tooth fairies - leave a whopping $20 or more per tooth, according to a separate survey by credit-card issuer Visa. At those rates, don't be surprised if you find your child trying to speed the process along with a pair of pliers.

MAKE IT A LESSON

Those who prefer to keep the fantasy of the tooth fairy alive may wish to turn the event into a teachable moment about the decision of what to do with the money after it magically arrives.

Do your kids immediately blow the windfall on candy or iPhone apps? Or are they forward-thinking enough to earmark some cash for things they will need in the future?

That is where parents can step in and provide some guidance.

You could teach kids about the popular "bucketing" approach to money management. For instance, putting some aside for spending, some for saving, and some for giving to charity in separate jars.

"Done correctly, the tooth fairy myth is useful in teaching young children about looking through the pain of loss, and being rewarded for going through something unpleasant which leads toward future growth," says Hank Mulvihill, a financial planner in Richardson, Texas.

For Claer Barrett, it was a surprise just how much emotion was generated by the idea of saying goodbye to the tooth fairy. It was as if she had just strangled Santa Claus.

"I have appeared on three national radio stations talking about my fairy death warrant so far," she says. "It encourages me that the message is getting through to parents around the world."